Yemisi Izuora
The International Energy Agency, IEA, has predicted that the United States is set to drive the global oil supply growth over the next 5 years, following its progressive shale industry which is triggering a rapid transformation of world oil markets.
The Agency, said in its just released annual oil market forecast that by the end of the forecast, oil exports from the United States will overtake Russia and close in on Saudi Arabia, bringing greater diversity of supply.
While global oil demand growth is set to ease, in particular as China slows down, it still increases an annual average of 1.2 million barrels per day, mb/d to 2024, according to the report, Oil 2019.
The IEA however, sees no peak in oil demand, as petrochemicals and jet fuel remain the key drivers of growth, particularly in the United States and Asia, more than offsetting a slowdown in gasoline due to efficiency gains and electric cars.
“The second wave of the US shale revolution is coming,” IEA Executive Director Fatih Birol said. “It will see the United States account for 70 per cent of the rise in global oil production and some 75 per cent of the expansion in LNG trade over the next five years. This will shake up international oil and gas trade flows, with profound implications for the geopolitics of energy,” he said.
The report said the global oil markets are going through a period of extraordinary change, with long-lasting implications for energy security and market balances throughout our forecast period to 2024.
The ability of the US shale industry to respond quickly to price signals by ramping up production has helped US transform into a major exporter within a decade. The United States accounts for 70 per cent of the total increase in global capacity to 2024, adding a total of 4 mb/d. This follows spectacular growth of 2.2 mb/d in 2018.
Iraq reinforces its position as one of the world’s top producers. As the world’s third-largest source of new supply, it also drives growth within OPEC to 2024. The increase will have to compensate for steep losses from Iran and Venezuela, as well as a still-fragile situation in Libya. The implications of these developments on energy security are significant and could have lasting consequences.
According to the report, in the longer term, security of supply is linked to upstream investment. Preliminary investment plans by major international oil companies indicate that upstream investment is set to rise in 2019 for the third straight year. For the first time since the 2015 downturn, investment in conventional assets could increase faster than for the shale industry.
In the downstream sector, product markets are on the eve of one of the biggest shakeups ever, with the implementation of the International Maritime Organisation’s new rules governing bunker fuel quality in 2020. Although the shipping and refining industries have had several years notice, there have been fears of shortfalls when the rules come into effect.
The US shale revolution is also altering the picture for refiners. These barrels are generally lighter and sweeter than the average crude slate, which means they require less complex refining processes to turn them into final products.